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Article history:
Received 22 January 2016
Received in revised form
1 June 2016
Accepted 8 June 2016
Although the diffusion of solar electricity has been swift worldwide, there is little certainty regarding the
adoption of this technology on rooftops, in locations where there is no specic policy on renewables in
place. In such cases, there is much uncertainty regarding the effect of solar penetration on electricity
prices to consumers and on the reduction of electricity demand from the grid. The penetration of solar in
the residential sector e which in some cases accounts for about 40% of the country's total electricity
demand e may have a tremendous impact on incumbent utilities and the industry as a whole. Much
research has been devoted to assessing the effect of policy on the diffusion of renewables but not much
work about the developing world is known, particularly in those nations where institutional arrangements do not favour these technologies. Using system dynamics, this paper examines these issues,
considering the diffusion of rooftop solar both with a battery support system, and also without any type
of storage system. An important conclusion is that policy is essential for system sustainability when PV
diffusion is taking place.
2016 Elsevier Ltd. All rights reserved.
Keywords:
Photovoltaics
Renewables
Technology diffusion
System dynamics
1. Introduction
An international outlook on the progress of Photovoltaics
(hereinafter PV, see Table A1 for all abbreviations), in recent years,
shows that this alternative for energy generation has been
increasing in both cumulative capacity (GW) and in generation
capacity (TWh). The International Energy Agency (IEA) [1], in its
Solar Photovoltaic Energy report, shows that the cumulative global
PV capacity has been increasing at an average rate of 49% per year,
in recent years. Moreover, the IEA's Medium-Term Renewable Energy
Market Report 2014 [2] shows how PV generation is increasing in
different regions and that this trend is expected to continue in the
near future.
Rapid increases in cumulative and generation PV-capacity can
be explained three ways: rst, by the intrinsic benets of PV
technology, which have motivated its adoption because of its
simple power generation process [3] and its environmental
friendliness [3,4]; second, by the reduction of PV systems' production costs [4], as the technology learning curves have made
and undesirable consequences by means of simulation experiments. To examine the issue, this paper develops a simulation
model built to assess, under two scenarios, the effects of the
diffusion of PV in the residential sector of an electricity market,
considering: rst, the standard diffusion of PV systems that maintain some support from the electricity grid and, second, PV systems
with storage support but no grid support, which provides the
householder with grid independence.
Colombia has been selected as the application case, given that
this is a country with favourable conditions for PV generation e PV
is cost competitive with the grid tariff [15] e and also that despite
the recently promulgated Law 1715 [16], which favours renewables,
there is much uncertainty concerning its implementation and
particularly regarding its effect on the rate of adoption, on prices
and on security of supply issues in the Colombian energy market.
The focus is on the residential rooftop solar generation sector in
Colombia as: a) the residential sector contributes about 40% of the
total electricity demand [17], b) 70% of all dwellings are houses [18],
and c) a large percentage of dwellings can easily install microgeneration PV systems. Some of the lessons from the Colombian
case might also be applicable in other situations and countries.
To reach the proposed objective, this paper is organized as follows: Section 2 provides a review of the international experience
on renewables' diffusion, Section 3 describes the Colombian energy
market and Section 4 describes the implemented system dynamics
(SD)-based model. Section 5 presents the main simulation results,
Section 6 reports validation and conducts a sensitivity analysis, and
nally Section 7 presents the conclusions of this work.
2. International experiences of the diffusion of renewables
A number of papers examine the impact of the diffusion of renewables on electricity markets, from aspects such as: consumption habits, supply intermittency and transmission system balance.
In this direction, Balcombe, Rigby & Azapagic [19] indicate that the
high diffusion of renewables in the United Kingdom has caused
problems regarding grid intermittency and market balance; similarly, der Veen & De Vries [20] illustrate market efciency and
reliability problems in the Dutch case. In the Spanish context, while
utilities experience reductions in revenues and prots, households
n [22] and
experience increases in electricity tariffs [21]. Wide
Keirstead [23] show that while in Sweden users change their consumption habits by increasing electricity consumption when using
renewables, conversely, United Kingdom (UK) households using
renewables reduce their electricity demand.
Many countries use different policies to promote renewables
[2,24]. Feed-in Tariffs (FITs) have been used with good results in
Japan, Germany, the United Kingdom and Spain, among many
others [3,7,9,10,25,26]. Other incentives, elsewhere, have focused
on nancial incentives such as Green Certicates [7,10] or Net
Metering [21].
Nevertheless, there are still countries, especially in emerging
economies, which do not actively promote the diffusion of renewables and, further, which maintain market barriers to their
dissemination, despite their countries' potential for use of renewables. In Latin American countries for example, the potential of
renewables including PV has been recognized at both utility and
residential scale, highlighting their benecial irradiance availability
and nancial competitiveness as compared with other technologies
[2,27,28]. Mexico, Brazil, Argentina, Chile, Peru, Colombia,
Guatemala, Ecuador and Venezuela were included in the European
Photovoltaic Industry Association (EPIA) PV opportunity mapping
of the Sunbelt, according to their solar resource and investment
attractiveness [28]. However PV installations remain low in most of
these countries, even though Mexico, Peru, Brazil and Chile stand
819
820
Price
Cost of Trading
Cost of Losses
Cost of Restrictions
+
+
+ Tariff
+
+
+
B1
R3
Cost of
Distribution
R4
+
Cost
Perceived
Benefit
Demand on
the System
Installed
Capacity
B3
-
Cost of
Transmission
+
R1
Households with PV
Microgeneration System
+
R2
Experience in PV
Panel Installation
+
Margin
+
-
B2
+
Installation of PV
Panels
Population
B4
Potential Households+of PV
Microgeneration System
relationship between the cost of the PV system and the grid tariff. It
also explains that the number of households with PV systems affects system demand and consequently the grid tariff.
Loops B1 and B2 explain the price formation in electricity
markets as given by Dyner [51]; Price is affected negatively by the
system margin (Margin is the difference between Installed Capacity
and the Demand on the System); it means that when Margin increases Price decreases because low demand can be supplied using
cheaper technologies. System demand is negatively affected by
households that acquire microgeneration (as part of their demand
is generated by their own PV systems) and by electricity tariff.
Finally, Installed Capacity increases when there are incentives to
invest in installed capacity; and these incentives are directly linked
to Price: when the price is higher, there is more incentive to invest.
Loop R1 explains the feedback between households with a PV
system and the perceived benet, showing the positive causal effect between them. Also, loop B4 explains that Potential Households increases households that adopt PV systems, but these in turn
cause decreases in the variable Potential Households.
Households with a PV Microgeneration System affect positively
Installation of PV Panels which, in turn, increase the Experience in
PV Panel Installation (because of the learning curves); this experience will decrease the cost of microgeneration as we explain in
Loop R2. An increase in the cost of microgeneration causes a
decrease in the Perceived Benet of microgeneration acquisition,
which again affects Households with PV Microgeneration System.
Loops B3, R3 and R4 show how distribution and transmission
costs depend on the system's demand, where price, trading costs,
losses and restrictions costs all affect the grid tariff. As Tariff increases there is a perception of the benet of microgeneration,
which increases the number of households that micro-generate
and decreases the system demand, which has an effect on system
margin; Tariff is affected by transmission and distribution costs, on
top of other related costs, as indicated in Fig. 3.
hypothesis, as discussed in Section 4.1. As an aid to better understanding, this section describes the main model components using
stock and ow diagrams, and displays the main mathematical
equations.
Fig. 4 shows the population dynamics and explains that the
household stock in the system depends on the population growth
dynamics and the number of persons per household. The Population stock increases according to the Population Growth Rate, and
the Total Households stock increases with New Households, which
depends on the population growth and average Persons per
Household.
Fig. 5 describes the stocks and ows related to the demand
dynamics, which, as in the explanation of the dynamic hypothesis,
depends on the total microgeneration in the system and the
average electricity requirements of households. Residential Demand on the System is the difference between the total households'
electricity requirement and the total microgeneration produced by
the adopter households.
Fig. 6 shows the diffusion process using the Bass model. It indicates that households that have access to information become
potential adopters of PV systems, and that the decision to adopt the
technology depends on the relationship between the grid tariff and
the PV system cost, as explained in the dynamic hypothesis e the
adoption is modelled according to a logit model.
Finally, Fig. 7 indicates how tariff is determined by generation
price and the costs of restrictions, losses, trading, and transmission
and distribution costs. Transmission costs depend on the total
market demand, and distribution costs to households depend on
residential demand.
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822
823
Table 1
Model equations.
Equations and comments
Units
Potential Households:
Households
Rt
Potential Households 0 Perceived Benefit Bass Cc Adoptiondt (1)
This stock considers the number of households that perceived the benets of PV microgeneration, excluding adopter households.
Adopter Households:
Rt
Adopter Households 0 Cc Adoptiondt (2)
This stock considers the number of household adopters in the system.
CC_Adoption:
g
Households
Households/
month
The Coefcient of Adoption was modelled according to a Logit model that includes the cost of PV microgeneration, the grid Tariff and the parameter
gamma [52].
kWh/month
Residential demand on the System:
R:Demand H:Requirement per Household*Total Households Total Microgeneration (4)
It is the total kWh/month that the households demand of the system. It is calculated as the total electricity requirement excepting the electricity that is
covered by the total microgeneration of the system.
824
Fig. 15. Hourly load curve, Colombian Market e Storage Scenario. (Arrow indicates
direction of time).
Source: Authors/simulation runs.
Fig. 16. Hourly load curve, Residential Sector e Storage Scenario. (Arrow indicates
direction of time).
Source: Authors/simulation runs.
825
grid decreases in the residential sector (Fig. 21) and in the whole
market (Figs. 22 and 23, respectively). For the residential sector, this
may even become negative under particular circumstances, which
means that there is excess capacity in the system. However, during
dark periods of the day, the system demand increases each year,
because the total number of households keeps increasing over time.
Note that electricity required during dark periods is supplied from
the grid.
The results for the entire market show that if regulation allowed
households' excess capacity to be used to supply other demand
sectors, during periods of sunshine, the grid-demand would be
reduced (Fig. 22). The consequences of this behaviour on the grid
tariff are presented in Fig. 24.
Fig. 24 shows the hourly evolution of the grid tariff e this, the
Colombian swan gure. Note that there are increases up to 250%
higher than for the storage scenario, over the simulation period.
These increases result from higher adoption rates of PVs, leading to
large increases in distribution costs, which depend on the residential demand (the larger the demand from the grid, the lower the
tariff). The behaviour of the components of the grid tariff is shown
in Figs. 25e27.
Note that the distribution cost increases, during the simulation
time, up to a limit that is required in order to prevent system
collapse (Fig. 27). Transmission cost also increases up to a limit
(Fig. 26). However, generation prices decrease because of the
reduction in the system demand requiring the cheapest units for
operation, but they increase at the end of the period because of the
distribution restrictions after around 2022 (Fig. 25).
These results shows that if no regulation is implemented in the
system, adoption with no storage would cause the system to crash,
as tariffs reach 0.37 USD/kWh, which is unsustainable. Moreover,
these results show that under these conditions the market collapses around 2024.
This section reports structural and behavioural validation processes undertaken in order to assess model consistency and
robustness, aimed at gaining condence in the simulations [33,53].
Moreover, this section also assesses some of the most relevant assumptions and initial model conditions, as well as sensitivity
analysis of results. For validating model structure, two different
tests were conducted. First, for boundary adequacy, testing examines whether endogenous and exogenous variables are consistent
with the purpose of the model. In this case, endogenous variables
such as Households with and without Knowledge, Adopter
826
Fig. 22. Hourly load curve for Colombian market using the surpluses of residential
generation e no-storage scenario.
Source: Authors/simulation runs.
Fig. 23. Hourly load curve for Colombian market losing surpluses of residential generation e no-storage scenario.
Source: Authors/simulation runs.
Households, Total Microgeneration in the System, Residential Demand on the System, Tariff, generation Price, and Distribution and
Transmission costs evolve according to their feedbacks, which is
consistent with the purpose of the model. Additionally, variables
such as Cost of electricity Losses, Cost of Restrictions, Trading Costs,
Hourly and Monthly electricity Requirement per Household, among
others, are exogenous given the purpose of the model. Second,
under the extreme-condition test, model runs showed that no PV
adoption took place: a) when grid tariff was free or negligible, and
b) when population dynamics was non-existent.
system transformation. Thus, for robustness and soundness purposes, this paper undertakes sensitivity analysis of parameters, as
reported below.
The rst evaluated parameter is the innovator's parameter (p),
which has been modied by 50% upwards and downwards from its
initial value. Results are presented in Fig. 28.
Results indicate that the value of the innovator's factor, p, is
important for dening the time when adoption begins. When the
innovator's factor is larger the diffusion process starts earlier than
when this is lower; this is reasonable, considering that this factor
describes innovator willingness and that information is available to
him/her, increasing the adoption rate by households. It is important
to note that regardless of the value of p at the end of the simulation
time, the number of adopters is the same, which gives robustness to
the results presented in Section 5 and reliability to the model
ndings.
The second condition evaluated is the sensitivity to the price
conditions. In this case, a comparison is made with the adoption
level when the PV system cost is changed. To make this comparison
it is important to discuss the importance of the technology price for
adoption in a place with the Colombian conditions. The literature
reports that nancial issues rather than incentives become barriers
to the adoption of renewables [10]. Moreover, Claudy, Michelsen,
O'Driscoll, and Mullen [54] highlight the importance of technology
information over the nancial issues, and explain that the technology knowledge and awareness precede the product characteristics' evaluation. Other authors explain that there are other factors
827
that are more important than the price difference [55], and authors
like Islam [56] highlight the importance of education and information over the adoption price difference. Most important to note
is that, in this case, grid parity was attained very early in the
simulation period; Fig. 29 shows simulation results for the sensitivity analysis of the costs of photovoltaic systems that were revised
50% upwards and downwards, respectively.
This gure shows that even for extreme cases, differences in the
rate of adoption of PVs remain negligible when grid parity has been
attained (as is the case in many Colombian sites [15]) and PV prices
are highly competitive compared with the grid tariff, as the
magnitude of the difference between the two is very large.
Finally, what may happen when grid parity is only reached
around 2022, half way through the simulation period, i.e. in places
where grid parity has not been attained yet? Three different alternatives are presented in Fig. 30, where the main conclusion is
that grid parity only delays adoption rates during the initial period,
but adoption levels converge to the same value at the end of the
simulation.
7. Conclusions
Favourable conditions for PV systems e sunshine availability
and low PV microgeneration cost [15] e will contribute to rapid
technology diffusion in the Colombian residential sector, as illustrated in this paper. This will, however, have a great effect on grid
electricity costs to non-PV users and will pose challenges to system
operators, as they will confront complicated load duration curves.
The effect of the diffusion of PV systems on tariffs and load
duration curves will depend on the chosen scenario. On the one
hand, under the storage scenario, the system exhibits gradual decreases in residential electricity demand and smooth variations in
electricity demand for the entire electricity market, which is reected in the load duration curve; furthermore, there are smooth
decreases in grid tariffs when PVs initially start penetrating the
market, but increases at the end of the simulation period as distribution cost exceeds generation. On the other hand, for the NoStorage Scenario, the entire system confronts dramatic changes,
including extreme increases in grid tariffs and problems in the
system balances, as can be appreciated from the load duration
curve.
Comparing both scenarios, we observe rst that the adoption
rates are similar in both scenarios despite the differences in PV
system costs, which can suggest that nance might not be the main
828
Fig. 30. Sensitivity analysis when grid parity is achieved half way through the simulation period.
Source: Authors/simulation runs
Acknowledgments
The authors are grateful to EPM S.A. E.S.P (CIIEN N
29990835044), COLCIENCIAS (Grant 645, 2014) and Universidad
Nacional de Colombia (Grants CF 161-163 and CF 179-177) for
providing the necessary nancial support for this paper. The authors are grateful to Dr Paul Ellis for proofreading.
Annex
Table A1 shows terms and abbreviations used in the paper.
Abbreviation
Explanation
COP
EPIA
FIT
GW
IEA
kWh
p
PV
q
RPS
SD
TWh
USD
Colombian Pesos
European Photovoltaic Industry Association
Feed-in Tariff
Giga watt
International Energy Agency
Kilowatt-hour
Innovation parameter
Photovoltaics
Imitation parameter
Renewable Portfolio Standard
System dynamics
Terawatt-hour
United States Dollar
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